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Who Should Run the MTA?

from the magazine

Who Should Run the MTA?

A lack of accountability has plagued New York’s struggling transit system for decades. Spring 2019
New York
Infrastructure and energy

New York City’s transit system, under the umbrella of the Metropolitan Transportation Authority, moves 8.6 million passengers daily across 736 stations on subways and commuter-rail lines, as well as buses. The MTA employs 74,087 workers and spends $16.7 billion annually. The organization performs all these feats despite an odd fact: nobody is really in charge.

When subway service began to deteriorate in 2013, leaving tens of thousands of passengers regularly stranded due to delays and disruptions, New Yorkers weren’t sure whom to blame. Was it the governor, who appoints the MTA chair and five out of the MTA’s 14 voting board members? Or the mayor, who appoints four board members? Or the MTA chair? A 2017 poll conducted by NY1 and Baruch College, as subway service fell to once-in-a-generation lows, captured New Yorkers’ confusion: 33 percent blamed Mayor Bill de Blasio for the subway woes, while 31 percent blamed Governor Andrew Cuomo.

The MTA’s nonexistent accountability structure contrasts with almost every other major government body in the city. In education, policing, firefighting, sanitation, homeless prevention, and many other key areas, one elected official—usually the mayor—names a commissioner to carry out his policies, subject to checks and balances from the legislative branch, Gotham’s city council. If the commissioner fails, voters can blame the mayor, who can replace the commissioner; if the new commissioner also fails, voters may choose to replace the mayor.

That New York transit is different is a consequence of a mid-twentieth-century creation: the public authority, essentially a government-owned corporation, with its own board of directors and management. Public authorities supposedly offered three advantages over government. First, like private businesses, they could attract top talent.

Second, the authorities, unlike government, would be self-sustaining, since they generated revenues independent of taxes. In New York’s case, that meant driver tolls, through the Triborough Bridge and Tunnel Authority, as well as the New York State Thruway Authority; real-estate profits, from the Empire State Development Corporation; student-housing payments to universities through the New York State Dormitory Authority; and other sources. This meant, too, that the authorities could raise debt for capital investments and repay the borrowed money with their income.

Third, the authorities’ insulation from direct political accountability would—or so proponents argued—enable public-authority officials to make tough decisions, such as hiking subway fares, without worrying about getting voted out of office.

The twenty-first-century MTA falls short. The highly qualified managers it does attract don’t have the political freedom to run the agency efficiently. The MTA is not self-sustaining—in fact, it depends heavily on state taxes. The agency is so deep in debt—$41 billion, more than double its annual revenues—that it can’t raise more money without new taxes. Its board and management nominally make decisions concerning how much to raise fares and which projects to fund, but they can’t really do so without the agreement of elected officials, particularly the governor. The board, for example, has consistently approved construction contracts to benefit Long Island commuters—from the $11 billion East Side Access project that will bring commuter trains to the East Side of Manhattan to two separate plans to expand track capacity within the island’s corridor—without asking Long Islanders to pay more, in fare or tax revenue, to subsidize the huge projects. It’s no coincidence that Long Island, by contrast with New York City, is a swing-voting region.

The MTA insulates elected officials from accountability for transportation, without shouldering accountability itself. When the MTA comes under fire for lousy service, Cuomo disavows responsibility, hiding behind the board structure. In 2017, amid headlines dominated by train delays and disruptions, Cuomo’s office noted that the state lacked a majority on the MTA board. The previous year, though, the governor happily took credit for opening the first three stations of the Second Avenue Subway on time: “You know who runs the MTA?” he asked NY1 anchor Errol Louis rhetorically. “It’s me. . . . I accept that responsibility.”

Now, a new generation of elected officials is questioning whether the public-authority structure still works. And if it doesn’t, what should replace it?

Over its 115-year existence, New York’s modern transit system has had four different management structures. The first was a regulated, for-profit monopoly. Private firms—the Interborough Rapid Transit and the Brooklyn Rapid Transit (later Brooklyn–Manhattan Transit)—used city money to build New York’s first two subway lines, and ran them. As construction and operation started, the future, under this arrangement, seemed bright. The major quibble about private operation, as the Citizens Union, a good-government group, expressed it in 1903, was that the deal, from the city’s perspective, was a “disadvantageous bargain”: that is, New York’s government would lose out on potentially tens of millions of dollars in profits that the subways would likely generate.

By the early 1930s, though, it was clear that private monopoly—the kind regulated by New York City government, at least—had failed. Providing heavy-rail mass transit could never be a normal competitive business, akin, say, to two supermarkets competing across the street from each other. The first two subway companies chafed at the prospect of any competition; the IRT, for example, considered Manhattan’s Broadway to be, as the Times put it back then, “its territory,” and it didn’t want competing lines or free transfers to other services to lure away its captive passengers.

The agency is so deep in debt—$41 billion—that it can’t raise more money without new taxes.

It also turned out that running a subway system wasn’t lucrative. The transit future was not profits, but deficits, and the ensuing argument was over who should bear the losses. After World War I, as inflation hit, the private companies suffered; they had unwisely agreed to maintain a nickel-a-ride fare indefinitely, and the city refused to renegotiate the agreement. By 1918, the BMT had racked up a $6.1 million cumulative deficit over the previous half-decade. The two lines, essentially broke, couldn’t expand to meet the needs of a growing city.

New York then embarked on its second experiment in transit management: direct municipal control. But the city built an “independent” subway line to compete with the private operators, grabbing some of their customers. By 1940, after the independent subway line was completed, the city had purchased the two private-company pioneers, which had become increasingly insolvent. But the city proved no better at running a mass-transit system than the private sector had been. Depression-era deflation added to intense pressure to keep the fare at a nickel. After World War II, Robert Moses–era New York had no interest in investing in transit; the glamour was in highways. Tolled bridges and tunnels were superior to subways, too, the thinking went—they would pay for themselves, since, once built, their operational costs were far lower than those of running subways. Moses’s Triborough Bridge and Tunnel Authority, one of the first public authorities, could raise money from bondholders to construct its marquee projects, using toll revenue from relatively wealthier drivers—compared with subway riders, anyway—to repay the debt, and even mint a profit. As of the early 1950s, the subways were in dire fiscal straits, running a $50 million annual operating deficit—nearly $500 million in today’s dollars.

New Yorkers then got their third experiment in subway management. In 1953, the state, over the objections of feckless Gotham mayor Vincent Impellitteri, stepped in to rescue the transit system from direct mayoral control. Governor Thomas Dewey, a reformer, signed a law to create the New York City Transit Authority—a method of governance under which the city would appoint two board members, the state would appoint another two, and the first four would agree on a fifth.

Though the state offered the city no extra revenues to go along with this new quasi-corporate structure, it did provide a financial sleight of hand: the new NYCTA could borrow against future revenues, and purchase needed equipment, such as subway cars and buses, with something called “equipment trust certificates,” to be repaid, as well, with future revenues. The NYCTA’s nominal independence from the city also was meant to instill fiscal discipline: over the long term, it could repay its debt by “fix[ing] the rates of fare . . . to be self-sustaining,” the Times reported.

Like its precursors, this management structure failed. The authority was never self-sustaining. By the time John Lindsay became mayor in 1966, a decade after its creation, the fare, at 20 cents, hadn’t risen enough to keep up with escalating costs—especially since a strike in the first days of Lindsay’s term ended with a generous labor settlement. By the late 1960s, NYCTA had exhausted its financial-engineering possibilities, and New York City was expected to pay tens of millions of dollars yearly to make up the difference between fares and costs. Yet the city, facing spiraling bills for social services, welfare, and policing, was going bankrupt. After more than half a century of stewardship, the city had shown itself unable effectively to regulate private subways, or to run them directly, or to run them in equal partnership with the state. It became obvious that the state, as part of its gradual bailout of fiscally distressed New York City, would have to rescue the subways.

In 1968, Governor Nelson Rockefeller and the state legislature created New York’s fourth management structure—the modern MTA. The new authority would merge profitable bridges and tunnels—that is, Moses’s Triborough Authority—with money-losing subways and buses, as well as private suburban commuter lines that, facing competition from airlines for long-distance trips and cars for shorter ones, were also bankrupt. Surpluses from bridges and tunnels, it was believed, would support deficits from subways, buses, and commuter rail.

Though the new MTA had city representation, the state dominated it. The governor would appoint more board members than would any other elected official; the governor would also appoint the MTA’s chairman. The distressed city had lost control of one of the major drivers of its fate: how people get around.

Give the MTA credit: it has lasted for 51 years, nearly half the life of the subway system’s existence, and longer than any previous management arrangement. On paper, it was a sensible invention. The transit system, after all, serves not only the city but also the suburbs and the state economy. Reflecting that reality, the governor, who represents all New York State residents, has the most influence, with a plurality of picks, plus the chairman. The city, the state’s biggest population center, gets the next-most members; northern and eastern suburbs served by commuter rail share the rest. This geographically diverse board, reflecting regional interests, yet ostensibly protected from political forces, must approve all fare and toll increases, budgets, and contracts, as well as the MTA’s long-term capital plan for new rail and subway projects. The MTA, in turn, can raise debt backed by fares and tolls to pursue board-approved expansion projects.

The MTA’s best days were its earliest. In the late 1970s and early 1980s, the agency was a model of independence. In 1981, then-chairman Richard Ravitch, a real-estate titan appointed by Governor Hugh Carey, convinced fellow business leaders that they must support new tax revenues—levies on petroleum, consumer sales, real estate, and general business—to fund transit. The Ravitch-era MTA then undertook a disciplined program of cataloging the MTA’s assets, determining a rational schedule for replacement and repair, and borrowing sensibly to fund long-term improvements. Fares rose to ensure that deficits did not pile up. Ravitch importuned the board to vote for the fare hikes, despite opposition from Carey as well as from Mayor Ed Koch.

In the 1990s and 2000s, the MTA appeared robust. The board had established a precedent of regularly increasing fares to keep up with inflation, and the authority even began to expand the system, undertaking projects such as the Second Avenue Subway and East Side Access, which would bring Long Island Rail Road trains to Manhattan’s East Side. By the start of the second decade of the new millennium, the MTA was moving record numbers of people each day—subway ridership exceeded the level seen just after World War II, before automobiles became ubiquitous—and supporting an expanding New York’s population, jobs, and tourism.

New Yorkers are split on whom to blame for transit troubles—Governor Andrew Cuomo or Gotham mayor Bill de Blasio. (BRYAN R. SMITH/AFP/GETTY IMAGES)

Nevertheless, the MTA’s health was fragile. In the late 1990s and early 2000s, the trains ran on time, but the board was no longer planning for the future. In 2001, the MTA was $15 billion in debt; today, the figure is $41 billion. In 2001, the MTA’s operating costs were less than $7 billion annually ($10 billion in today’s dollars); today, the figure is $16.7 billion. The biggest inflation factor has been worker-retirement and worker-health-care expenses: in 2001, such expenses cost $1.2 billion ($1.7 billion in today’s dollars); today, they cost $3.4 billion. Escalating costs have encroached on the MTA’s ability to conduct regular maintenance and inspection of its tracks and signals. By 2017, 70,000 subway trains were delayed each month, triple the figure of half a decade earlier.

All levels of New York government have experienced the same phenomena: ballooning debt and labor costs crowding out investment in physical assets and services. But the MTA’s independent board structure was supposed to immunize transit from such trends.

Instead, board members have been cowed by short-term political forces, calling into question a major justification for the public-authority system. Reluctant to raise elected officials’ ire, they’ve regularly voted for budgets in which long-term costs outpaced long-term revenue projections, ensuring that the legislature would often have to raise taxes to pay for the spending (the last major tax hike, in 2009, pushed an additional $2 billion annually into the MTA budget). The board has also approved projects on a political basis—prioritizing initiatives like East Side Access, for example, over modernizing the New York City subway signal system. And the board has failed to rein in bloated labor and construction expenses, which help make New York projects cost many multiples, per mile, of those undertaken in other major Western cities.

One reason for the board’s poor performance is that its members invariably hail from the local-government, real-estate, and nonprofit worlds, all heavily dependent on state largesse. Current and former members acknowledge that the board is reluctant to clash with the governor. A potent example of the board’s lack of influence materialized in late January. For the previous three years, the MTA had insisted that it had to shutter the L train from Brooklyn to mid-Manhattan for more than a year, in order to conduct critical repairs. The board agreed, and the city expended human resources—and money—to put together a contingency plan, including new bus and bike lanes. In January, however, Governor Cuomo convened a panel of experts to say that the MTA was actually wrong: it did not have to shut down the L train, after all, but instead could apply more innovative short-term fixes by working on nights and weekends. The governor’s alternative leaves many questions unanswered, including whether passengers will be exposed to silica dust as repair work progresses and whether the new scheme will take as long as the original one. Yet the board, intimidated by Cuomo, hasn’t exercised its right—and its fiduciary duty—to vote for or against the new proposal, instead acceding to the governor’s wishes.

The consequences of MTA misgovernance have become apparent in more obvious ways, as well. Since 2016, riders have been deserting the subway and bus system, using e-hail services such as Uber and Lyft instead, causing greater congestion aboveground. Long-term, without an expanding transit system, a hyper-dense city like New York cannot grow.

The board’s independence was always partly a fiction, and it has become increasingly so, as the MTA becomes ever more dependent on the state to provide tax revenues to service its escalating debt and labor costs. As John Kaehny, executive director of Reinvent Albany, a good-government group, points out, the MTA board is nothing like a functional corporate board. A corporate board names its own chairman and CEO and can exert influence on him or her. At the MTA, the governor appoints the CEO, and “the board cannot fire, sanction, suspend, torture, whatever, the chair,” says Kaehny. Further, the board lacks the independent staff that would let it perform effective oversight of the MTA’s activities; instead, the MTA staff, appointed by the CEO, “can mislead the board, and does,” adds Kaehny. “The staff spoon-feeds the data, the information that the board gets to see. . . . Board members are acutely aware of their inability to know what’s going on.” Other possible sources of checks on the MTA remain disengaged. The state legislature, for instance, performs minimal oversight of the authority, and its staff has little expertise in transit issues.

This all creates a dangerous vacuum. The MTA is basically controlled by the governor when he wants control of it—as in the opening of the Second Avenue Subway—but orphaned when he doesn’t, as in the case of declining service.

The presence of a strong, independent chairman and board members could counteract this problem. Ravitch had sufficient personal wealth and charisma to make any governor reluctant to thwart his wishes. The current MTA board isn’t peopled with such individuals, however. It is not yet clear whether new chairman Patrick Foye, who previously headed the Port Authority, has a strong enough base to act independently.

The passage of time has reduced respect for the MTA governance structure. As Rohit Aggarwala, a former Bloomberg-administration infrastructure official and now head of urban systems of Sidewalk Labs, an Alphabet startup focused on urban innovation, says, “institutions tend to lose their bearing over time. They start with a mission, and everyone—the politicians who set it up, the early employees and executives, the public—has an understanding of what it was intended to do. That allows it to stick to its mission. Twenty years later, those people have . . . moved on.” The MTA is a perfect example, Aggarwala continues. “When it was new, and its mandate was to be independent, challenge the governor, and save the subways, it did just that under Dick Ravitch’s leadership. Now, though, many of the MTA’s employees still think that their mission is to save the subways and that we should all marvel at the fact that the thing even functions.”

The MTA is basically controlled by the governor when he wants control of it but orphaned when he doesn’t.

What, then, might be done? In early March, City Council Speaker Corey Johnson offered a radical solution: the state should transfer control of the subways, buses, and bridges to New York City, along with the tax revenues that go with it. “Transit is at the heart of the crisis we’re in right now,” Johnson said, speaking of the New Yorkers who can’t get to school or work on time. “But right now, I can’t fix it. My hands are tied. . . . If we can’t move people around, New York City can’t function.”

Johnson’s idea is a good one. In a healthy democracy, New Yorkers should look to their mayor and city council—their most directly elected representatives—for functional government services. Tellingly, two major New York City figures with a keen understanding of infrastructure—former MTA chairman and Giuliani-era deputy mayor Joseph Lhota, and Bloomberg-era deputy mayor Howard Wolfson—support the concept. Yet it’s highly unlikely to occur. As Kaehny says, “the state has fought bitterly to maintain every bit of meddling power that they can get.” The legislature and governor would be especially unwilling to give the city control over its own tax revenues. Though the $6 billion annually in taxes that the MTA depends on largely comes from city residents, workers, and visitors, the money flows through the state first. To give the city these revenues directly would make it more independent of Albany—something the state, always wary of Gotham’s economic and population power, is loath to do. In fact, this year’s state budget goes in the opposite direction, putting the MTA in control of a newly enacted congestion-pricing regime.

Short of Johnson’s dramatic step, Kaehny offers other reasonable suggestions. The legislature could change the MTA’s board structure to give the board, rather than the governor, the power to hire and fire its chairman and CEO. Then “the board would be extremely important all of a sudden,” he says. The legislature could also require that the board’s composition include representation from the state comptroller’s office as well as the state legislature’s majority and minority factions, which might introduce some modest checks and balances. “You have to bring the legislature into it in some way,” Kaehny maintains.

Ravitch, chairman in the late 1970s and early 1980s, disagrees. The MTA doesn’t need structural reform, he says: “It needs leadership. It needs somebody who can fulfill the fiduciary duty of the board’s responsibilities.” The job criteria, he notes, are “independence, business experience, courage to stand up to the governor, willingness to confront the political system, relationship with the business community.” That’s a tall order in modern-day New York, where key industries, including real estate, depend on special subsidy carve-outs from the state and city for their business models and cannot afford to upset key politicians.

That, indeed, is the crux of the problem, with institutional reform or without it. The MTA, in the end, is still the creation of democracy—in this case, of an increasingly dysfunctional, yet increasingly powerful, New York State government, resentful of the influence of the city and fearful of reforming unsustainable labor and retirement costs and of asking vote-rich suburbs to pay their fair share of infrastructure investment. “The MTA process is designed to deflect accountability,” as Johnson says. To fix it, the governor and the legislature first have to un-design it—and then level with voters about the hard truths.

Top Photo: Service delays and overcrowding have become endemic in the New York subway system. (DAVID GROSSMAN/ALAMY STOCK PHOTO)

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